In an unusually public conflict, two business groups are battling over rival plans how to apply a state fee that will raise $3.3 million by 1996 for environmental regulation.

At issue is a bill -- backed by the state Department of the Environment -- making its way through the General Assembly that would dramatically increase the cost of permits that allow companies to emit air pollutants. While the total collected by the state would remain the same under an alternative plan, the stakes for each of the companies affected amount to tens of thousands of dollars.

In one corner and supporting the bill is the Maryland Chamber of Commerce, usually seen as the voice of business in the assembly.

In the other corner and supporting an alternative fee structure is the Manufacturing Competitiveness Coalition. The coalition is an hoc group of about 50 Maryland manufacturers, which argues that the bill benefits utilities, in particular the Potomac Electric Power Co., at the expense of manufacturers.

The conflict has its genesis in the federal 1990 Clean Air Act, which requires state environmental departments to charge industries a fee to pay for the regulatory tasks mandated under the law. The Maryland Department of the Environment has calculated it would need $3.3 million by 1996, with lesser amounts needed in the intervening years.

After months of negotiating with the state chamber, the department devised a plan that would begin charging Maryland companies this year $15 for every ton of air pollution emitted, based on 1990 figures. This would increase to $25 a ton by 1996, with a $200,000 maximum for each site.

The coalition was started by manufacturers who charged the Chamber of Commerce was favoring the utilities in reaching the agreement with the Maryland Department of the Environment which left other companies on the sidelines.

Supporters of the bill counter that companies in the coalition were distorting the purpose of the fees and don't want to pay their fair share.

The open conflict is a rare public display of disagreement between these two sides, which typically attempt to reach accords in private.

"I think it was a back-room deal between the chamber, the utilities and the Maryland Department of Environment to cut a sweetheart deal for the utilities," said Carolyn T. Burridge, the lobbyist for the coalition.

Others in the coalition said they were mystified as to how the decision was reached.

"I still don't know how that [decision] was determined," said Louis H. Kistner, director of communications for SCM Chemicals Inc., headquartered in Baltimore.

But Ernie A. Kent, vice president for government affairs for the chamber, said the fee proposal was reached by informal discussions with small groups of members, and that there was never a formal vote by either the chamber's environmental council or even the chamber's board. "It was a consensus decision," she said.

Gene Bracken, spokesman for the chamber, also added that a variety of businesses were consulted in the decision.

The proposal would raise the amount paid by many large companies to between $30,000 and $200,000, up from about $2,000 to $10,000 now. Bethlehem Steel Corp., for example, would see its bill for the Sparrows Point plant jump to $200,000 a year by 1996 compared to $10,000 currently.

According to the coalition, which formed in January to fight the department's proposal, the cap unfairly benefits utilities. Utility companies -- which release the most industrial pollution tracked by state regulators -- would pay less per ton of emissions than do most other companies, it claimed.

Instead, the coalition is pushing for an alternative fee structure that contains no cap. Under its proposal, the rate per ton would be only $6.65 by 1996 rather than $25. The difference would be made up by several companies paying more than the proposed $200,000 ceiling. PEPCO would end up paying much more -- $1.4 million compared with $600,000 under the departmental bill, based on company figures. The coalition itself estimates that PEPCO would pay about $1 million more under its plan.

PEPCO does not agree. "They are trying to turn a fee assessment program into a pollution control argument," said Nancy S. Moses, a spokeswoman for the company, which serves Washington and most of its Maryland suburbs.

Ms. Moses said the utility was cheaper and simpler to regulate because it has only six main smokestacks -- two at each location -- and the company is installing monitoring devices in those stacks that would be linked directly to state computer systems.

Additionally, the company will be spending more than $500 million to reduce emissions over the next seven years because of federal regulations, Ms. Moses said.

"The debate is being badly distorted by those who do not want to pay," she said.

So far, the coalition's efforts have not fared well. A bill proposing its fee structure was defeated in a House of Delegates' committee. Attempts to amend the departmental bill on the House floor, where it is now, have been unsuccessful.

Ronald Nelson, deputy secretary of the Department of Environment, said the state decided on the fee structure with the caps as a way of encouraging manufacturers to reduce air emissions and to charge a proportionally higher fee to companies that are harder to regulate.

While utilities in the state account for 466,000 tons of emissions out of a total of 540,000 tons that are tracked by the state, they are fairly easy to regulate because their emissions are limited to small collection of smokestacks that emit primarily sulfur dioxide and nitrogen oxide, Mr. Nelson said.

In contrast, emissions by manufacturers, which include a wide variety of chemicals, come from an large array of vents and stacks.